Social Procure-to-Pay (P2P)

I have been involved with business process analysis and design throughout my career, as a logistics and supply chain practitioner and as management consultant assisting clients with business transformation initiatives. More recently I have taken an interest in the adoption of social business collaboration (SBC) tools by businesses and other types of enterprises. In particular I am interested in the potential for changing business processes, practices and organizational structures to take advantage the opportunities created by SBC technologies.

The Procure-to-Pay (P2P) business process is one of the core end-to-end processes of almost every enterprise. As depicted below, the process usually begins with a requirement to procure goods or services and is completed with payment to the supplier. In many organizations this process is enabled by an Enterprise Resource Planning (ERP) system.

In a discrete manufacturing environment, where ERP systems were first deployed, the requirements are driven by a production schedule and determined by a bill of materials (BOM). The process is repetitive and often highly automated. In most cases, with perhaps the exception of approval workflow and exception management processes, there is restricted scope for social collaboration. The opportunities for social collaboration are upstream in the master data management, product lifecycle management and supplier relationship management processes.

However in most organizations the P2P process also supports procurement scenarios that are not repetitive and the requirements are not as clearly defined. In these cases there are real opportunities to change the way that work is done to exploit the capabilities of SBC tools.

For example if I have a need that could be satisfied by a range of different products then it would be useful to publish a description of my need to my social network, soliciting comments on the “best tool for the job”. This approach, often called crowdsourcing, is common practice in personal social networks, but current ERP solutions cannot easily support it. The ERP assumes that the requestor knows exactly what they want when they create the purchase requisition. In addition, if I share my needs with the network there will be situations when my needs can be met from existing unused inventories, much of which is not visible to the ERP system once it has been financially expensed.

These are but two examples of how the existing P2P process can be changed to take advantage of the capabilities of SBC tools. There are many more opportunities in this and other ERP business processes.

Today’s ERP systems carry with them the legacy of their past – their logical model of the business process is based upon the documents that manually flowed from function to function in the days before automation. The purchase requisition form feeds the purchase order, which in turn is acted upon to recognize the goods receipt. The supplier’s invoice is matched with the purchase order and the goods receipt document before payment is made. Each of these electronic documents existed as a paper document prior to ERP systems. In some cases the paper documents are still produced and filed.

In contrast, and in recognition of how knowledge work is done, the emerging SBC tools are people centric, not document centric. It will be interesting to see how the ERP software vendors choose to integrate SBC tools into their offerings. Can they bridge the people and document centric divides successfully?

Let me know what you think about the prospects for “Social Procure-to-Pay”.

Share more, Learn more

The other day a colleague of mine, Simon Scullion, posted a blog Balancing the use of our time which was built upon a quote from a post by Julien Smith, How to Change Your Life: An Epic, 5,000-Word Guide to Getting What You Want

the way your time should be spent is largely like a pyramid, with a wide base of learning, with a smaller level of acting on top of it, which is directed by the learning, and then on top of that, an even smaller level of writing about it. If you begin to live your life differently than the pyramid should be built, it becomes unbalanced and topples over

Simon re-interpreted the words “acting” and “writing” as “doing” and “sharing” and produced the image at left:

While I agree with their premise, the image that came to my mind was more of a cycle, where learning enables doing, doing enables sharing and sharing enables more learning.

At first it may seem counter intuitive – how does my sharing enable more learning?

It has been my experience that when I share my thoughts I have learned a great deal from the comments and feedback that follow. In some cases I have been challenged to explain my ideas more clearly or completely. In other cases I have had to respond to holes or inconsistencies in my argument. While I may not always agree with the comments, sharing my thoughts certainly has stimulated me to learn more. Sharing can be the driver of a virtuous cycle.

In their recent book Race Against The Machine; How the Digital Revolution is Accelerating Innovation, Driving Productivity and Irreversibly Transforming Employment and the Economy, authors Brynjolfsson and McAfee describe the accelerating rate of technology innovation and how it relates to the demand for labor.  

The New York Times have an excellent graphic that shows how the rate that technologies spread in our society has accelerated over the course of the last one hundred plus years.

   

One of the implications of this phenomenon is that the shelf-life of the body of knowledge for a particular technology is growing ever shorter. As a result what you have learned in the past becomes increasingly less relevant.

So, if I build upon Julien and Simon’s thinking and the observations made by Brynjolfsson and McAfee and the New York Times, then I conclude that we need to change the balance of our time spent learning, doing and sharing in favor of sharing and learning. We must leverage increased sharing to accelerate our learning and enable us to continue to perform the work and deliver the services that are in demand.

Is your organization encouraging you to share more? Are you changing the balance of your time spent doing, learning and sharing?

Please share your thoughts, I want to learn more! 

Internalizing Positive Externalities

In my last blog post, He just up and did it, I speculated about the potential to use employee education as a means to overcome the resistance of ingrained habits and a fixed mindset that have conspired to prevent potential users of social business collaboration (SBC) tools from investing the time needed to master the new technologies, change the way that they do business and share their valuable content.

A comment about that post from one of my colleagues, Mark Masterson, raised a good point:  

Because one thing you're overlooking here is that there is a cost/benefit analysis implicit in every single worker exposed to the potential change. For some, the cost (amount of effort, degree of education, psychology, whatever) will exceed any imaginable benefit. Every time.

I think that it is worth exploring the economic concept of Externality to see if it can help us to crack the cost/benefit nut.

In standard economic theory an externality occurs when a third-party is affected by a transaction between a buyer and a seller. As a result, the price of exchange does not reflect the full cost of producing or consuming the good or service. The classic example used to illustrate this concept is that the price of goods produced in a factory that emits air pollutants as a by-product of the production process does not reflect the costs to society of the negative effects from that pollution. As a result the prices of the goods are set too low and the goods are over-consumed.

In order to address the problem of the failure of the pricing mechanism there are public policy remedies that can be applied, such as a pollution tax. In theory, the funds collected from the tax could be used to mitigate the effects of the pollution, thus reducing the harm to society. An alternative approach is to establish regulations that require the producer to “internalize” the third-party costs by either paying for remediation or prevention, such as installing pollution control devices. As you can imagine establishing a fair remedy can be very challenging – it is not possible to precisely determine the actual external costs.

Externalities need not always be negative, they can be positive too – the third-party benefits instead of being harmed. However, when positive externalities exist the goods or services will be relatively under-consumed rather than over-consumed.  It has been said that public funding of education is justified by the positive externalities generated by education - the benefit to society of a more productive and innovative workforce.

At this point you may be wondering what all this economic theory has to do with the choices being made by employees and their cost/benefit calculations.

One of the key benefits that can be enabled by deploying SBC tools is access to the Network Effect. As the number of users of the network increases the value to its members, and the enterprise as a whole, increases at an accelerated rate. The network effect is an example of a positive externality scenario.

It is reasonable then to consider what policies can be employed to internalize the positive externalities – to make them part of the employee’s cost/benefit calculation. Should an organization create an incentive for individuals to share content with the network, such as rewards or recognition programs? At the very least, shouldn’t the organization incorporate a discussion of externalities and the network effect into their education curriculum? Can we use these or other approaches to bring the employee cost/benefit calculations into alignment? There may not be a perfect solution to the cost/benefit problem but there are things that can be done.

Before you say “not so fast Henry”, I am aware that there are challenges and potential side effects of creating incentives for sharing. Since it is not possible to determine the actual value of sharing content, then how do you determine the correct level of incentive? Additionally, some employees may game the system for their own benefit, sharing more content just to qualify for incentives. This behavior would degrade the average quality of content and effectively impose a tax on their colleagues. 

It is my experience that social networks have evolved cultural responses to the “over-share” problem, with active policing by the members of those that violate the group norms. Failing that there are means to “turn down the volume” on repeat offenders. I have also found that SBC tools, such as content ratings and “likes”, can be used to highlight the valuable content, allowing it to “bubble up” and separate it from the mundane. The usage pattern for SBC tools is different from earlier collaboration tools. While the norm for reviewing your email inbox may require reading each message, this is not true for an SBC activity stream. I rely on keyword tags and “top liked” widgets to keep me informed of valuable content. I certainly don’t review every document, discussion or blog that passes by in my activity stream.

What is your organization doing to address the challenges of motivating employees to share their valuable content with the enterprise? Have you tried any of the approaches mentioned or perhaps something else? 

I would be pleased to hear what you think.